The Hindu Business Line : 10% additional cover for exporters on the cards

Mumbai, Dec. 23 Exporters and banks financing them can look forward to some succour shortly as the Government is expected to announce an additional 10 per cent insurance cover over and above what is provided by the Export Credit Guarantee Corporation of India (ECGC).

With Indian exporters being buffeted by the severe slowdown in demand for their products and services from buyers in the US and Europe, the proposed move could help exporters recoup at least some of the losses suffered by them.

The proposed move by the Centre to provide additional cover is part of the Rs 350-crore back-up facility for ECGC that was announced recently.

“A formal announcement regarding additional insurance cover for exporters is likely to be made by the Government in a day or two. This would help alleviate the pain of exporters who have suffered losses,” said Mr S. Prabhakaran, Executive Director, ECGC, at a Confederation of Indian Industry seminar on “Global Meltdown: Challenges for Indian Exporters.”

He explained that an exporter who is, at present, covered to the tune of 80 per cent of his/her exports by ECGC would stand to get an additional 10 per cent cover as per the proposal under the Government’s consideration.

No increase in premiums

Mr Prabhakaran emphasised that the Corporation had “not at all” revised premiums upwards despite the downturn in the global exports scenario. “In fact, we had reduced premiums rates across the board in 2007 by 10 per cent.”

In the current times of uncertainty when overseas buyers are either going bust or going back on their purchase commitments, ECGC is encouraging its customers to take turnover-based policy rather than transaction-based cover. The Corporation, the official pointed out, has downgraded the country ratings of Argentina and Iceland while that of Cuba has been upgraded Claims in the current financial year so far, according to the Mr Prabhakaran, were nearly 50 per cent higher than the position obtained in the corresponding period last year. Claims on hand for ECGC amounted to around Rs 250 crore in FY 2008-2009 so far.

More claims

With increased incidences of non-payment by overseas buyers, exporters’ claims have increased.

Claims were increasingly emanating from the textiles sector, Mr Prabhakaran said adding a clutch of Indian textile companies had been hit badly on account of the US-based clothing store chain Steve and Barry’s filing for chapter 11 bankruptcy. The losses of Indian exporters on this count alone added up to around Rs 30 crore. Some other set of exporters also suffered losses to the tune of Rs 30 crore when the UK-based discount fashion chain Ethel Austin went into administration.

Pointing out the opportunities available to Indian exporters in the current scenario of global demand slowdown, Mr David Rasquinha, Chief General Manager, Export-Import Bank of India, said “on the demand side opportunities exist for consolidation and rationalisation of number and scope of vendors by large buyers; adaptation of product line offerings, supply chain and distribution channels; and diversification of markets.”

Supply side opportunities, according to the Exim Bank official, include fall in petroleum and petroleum-related inputs, including freight; fall in LIBOR; need for active treasury management.

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